How to find the right homebuying assistance program in Chicago

If you’ve done any basic research on purchasing a home, you probably know that in a traditional mortgage model, you’re supposed to put down 20 percent. That can be a lot of money — especially for first-time homebuyers who don’t have a previous home to sell. And it’s often even more challenging for potential homeowners of color; according to Prosperity Now, while the Illinois homeownership rate is 66 percent overall, it’s 74.6 percent for white households and just 48.4 percent for households of color.

That’s where assistance programs for potential homebuyers come into play. You may already know about some national assistance programs, such as Federal Housing Administration loans and VA Home Loans. In fact, there are a bunch of options out there, on both the national and local level, so experts recommend that first-time homebuyers of any income bracket speak with a Department of Housing and Urban Development-approved counseling agency in their area to learn about their personal possibilities.

“They are going to know what’s going on, not only at the municipal level, but they’re going to know if there’s any assistance available through your county, if there’s any available through the state, and then also what banks in your community are offering assistance as well,” said David Young, director of capacity building at Housing Action Illinois, a housing counseling intermediary that distributes HUD funds to housing counseling agencies.

These counseling services can “provide a neutral opinion as far as, what is the goal that [a family is] trying to reach, how feasible is it, and what are the action steps that we need to take to make that dream a reality,” explained Lizette Carretero, homeowner support team lead at The Resurrection Project, one of those HUD-approved local agencies, which also offers a lending product and internal real estate agents.

We’ve broken down a few of the programs specific to Illinois and Chicago and will help you figure out which ones could be the right fit.

Illinois Housing Development Authority (IHDA) homebuying programs

“The Illinois Housing Development Authority (IHDA), which is the state of Illinois’ housing finance administration, provides a [few] different types of down payment assistance,” Young said.

Specifically, IHDA offers three programs to both first-time and repeat homebuyers throughout Illinois. In the first, called the IHDAccess Forgivable Mortgage, homeowners can nab 4 percent of the purchase price (up to $6,000) to go toward down payment and closing costs, and that money is forgiven monthly over 10 years. With the IHDAccess Deferred Mortgage, on the other hand, homeowners can get 5 percent of the purchase price (up to $7,500) for help with down payment and closing costs, but the money is offered as an interest-free loan—it’s deferred until you sell your house, refinance, or pay off your mortgage. The third option, the IHDAccess Repayable Mortgage, offers 10 percent of the purchase price (up to $10,000) for down payment and closing costs as an interest-free loan that you must repay monthly over 10 years.

For all three programs, you must have a credit score of at least 640, and you must meet certain income and purchase price limits that differ based on your location and household size. For example, in targeted areas in Cook County, the maximum purchase price of a one-unit home is $404,806, and in non-targeted areas in the county, it’s $331,205.

Young said that the first of the three programs is ideal because you don’t ever have to pay the money back so long as you fulfill the program requirements, “but all three of these programs are really designed to help people that are interested in buying in Illinois, and all three of these programs I think can work very well, depending on what the household needs.”

Chicago’s Building Neighborhoods and Affordable Homes Program

The City of Chicago’s Department of Housing offers a bunch of homebuying assistance programs. This particular one is targeted to potential buyers of single-family homes built under the City Lots for Working Families program in Englewood Square, North Lawndale, South Lawndale, Humboldt Park/Garfield Park, and Woodlawn. Buyers can use grant funds of up to $60,000 to fill the gap between a home’s sales price and its appraised value, and any remaining funds (to a certain point) for everything from closing costs to down payments and appraisals.

“One other thing that is very exciting about this particular program,” said Young, “is that the household income can go up to 140 percent of the area median income, which means that [there’s help] for households that sometimes aren’t able to get assistance because they make too much money.”

Additionally, with this program, buyers must make the house their main residence for at least 10 years (or the house must be sold to an income-qualified buyer).

Chicago’s Community Connections Home Buyer Assistance Program

If you’re a Chicago police officer, firefighter, or paramedic, you’ll want to check out this pilot program. With it, eligible first responders and career service employees can receive a $30,000, 10-year, no-interest loan for a house in a designated Chicago area, and that loan will be totally forgiven after that decade, with no monthly payments required.

“This program has a renewed focus on encouraging first responders and career service employees to live in the communities they service, thereby promoting neighborhood improvement through increased home sales,” according to the Department of Housing.

Neighborhood Lending Program Home Purchase and Purchase/Rehab

The City and Neighborhood Housing Services (NHS) provides deferred, forgivable, first and second mortgage loans through the Neighborhood Lending Program for purchasing or purchasing and rehabbing one- to four-unit buildings. The money can cover down payment, closing cost, and affordability assistance, and even lead-based paint abatement.

To qualify, your household must bring in less than 80 percent of the area median income, which is about $59,600 for a family of four.

TaxSmart

This program is different, with it, eligible first-time homebuyers or homebuyers in targeted areas can apply for a Mortgage Credit Certificate (MCC). According to the City’s website, “The MCC allows the homebuyer to claim a tax credit for a portion of the mortgage interest paid per year. The current rate of annual savings is 25 percent for a home purchase or 50 percent for home improvement or rehab loans. The annual savings is capped at $2,000.”

To receive an MCC, you must apply while obtaining your mortgage — you can’t get one after you close. “Not a lot of lenders offer this specific program,” said Carretero, “but it really does provide additional tax relief when you file your personal taxes.”